Japan deflationary pressures remain high in 4Q

TakashiMochizuki

TOKYO (MarketWatch) -- A key indicator used to assess the extent of price falls in Japan widened in the October-December period, the Cabinet Office said Monday, showing that long-running deflationary pressures remain high.

Japan's gross domestic product gap--the difference between productive capacity and demand--stood at minus 3.4% in the final quarter of 2011, compared with minus 3.0% in the previous quarter.

Although the result was much narrower than the worst-ever reading of minus 8.7% in the first quarter of 2009, the negative figure means prices in Japan are expected to keep falling.

When the GDP gap is in negative territory, prices are in theory falling because productive capacity--such as workers and other resources--needed to produce goods and services exceeds demand for those goods and services.

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